Kronox Lab Sciences IPO Basis of Allotment

KRONOX LAB SCIENCES LIMITED

Our Company was incorporated on November 18,2008 as ‘Kronox Lab Sciences Private Limited', a private limited company under the Companies Act, 1956, pursuant to a certificate of incorporation dated November 18,2008 issued by the Assistant Registrar of Companies, Gujarat, Dadra and Nagar Haveii,!Subsequently, our Company was converted into a public limited company pursuant to a resolution passed by our shareholders at an extra-ordinary general meeting hetd on May 25,2019 and a fresh certificate of incorporation dated June 11,2019 was issued by the Registrar of Companies, Ahmedabad consequent upon conversion, recording the change in the name of oiur Company to 'Kronox Lab Sciences Limited'. For further details on the changes in the name and registered office of our Company, see History and Certain Corporate Matters" on page 201 of the Prospectus dated June 06.2024 filed with the RoC ("Prospectus").

Our Company has filed the Prospectus with the RoC, and the Equity Shares are proposed to be listed on the Main Board of the National Stock Exchange of India Limited ("NSE") and BSE Limited ("BSE") and trading will commence on Monday, June 10,2024

INITIAL PUBLIC OFFERING OF 95,70,000 EQUITY SHARES OF FACE VALUE OF * 10 EACH ("EQUITY SHARES") OF KRONOX LAB SCIENCES LIMITED ("OUR COMPANY" OR "ISSUER") FOR CASH AT A PRICE OF * 136 PER I\ EQUITY SHARE (INCLUDING A PREMIUM OF* 126 PER EQUITY SHARE) ("OFFER PRICE") AGGREGATING TO Rs. 1,301.52 MILLION ("OFFER"). THE OFFER COMPRISES AN OFFER FOR SALE OF 31,90,000 EQUITY SHARES AGGREGATING TO Rs. 433.84 MILLION BY JOGINDERSINGH JASWAL, 31,90,000 EQUITY SHARES AGGREGATING TO * 433.84 MILLION BY KETAN RAMANI AND 31,90,000 EQUITY SHARES AGGREGATING TO Rs. 433.84 MILLION BY PRITESH RAMANI (COLLECTIVELY, "PROMOTER SELLING SHAREHOLDERS" AND SUCH OFFER FOR SALE BY THE PROMOTER SELLING SHAREHOLDERS, "OFFER FOR SALE"). THE OFFER CONSTITUTED 25.79% OF THE POST-OFFER PAID-UP EQUITY SHARE CAPITAL OF OUR COMPANY.

1. Our products are required to meet domestic and international industry standards. Further, our export sales contributed Rs. 169.70 million, Rs. 195.67 million, Rs. 242.68 million, Rs. 192.95 million and Rs. 128.43 million of our revenues representing 25.07%, 26.41%, 25.39%, 23.46% and 20.56% of our revenue from operations for the nine months periods ended December 31, 2023, December 31,2022 and the Fiscals 2023,2022 and 2021 respectively. In the event of any deviation from these standards, our products may face rejection from our customers, which may affect the reputation of our Company.

2. If we fail to execute our strategy to expand our business or our production capacity or if are unable to expand our production capacity and products manufactured at Unit - III as GPCB has restricted any such expansion in the area where our Unit- ill is situated i.e. Padra region, near Vadodara, Gujarat due to ground water contamination related issues. We are therefore limited to the manufacturing of only certain products at our Unit - III that are viable under such restrictions. In the event the restrictions from GPCB continue to subsist, as above or any directions to reduce the capacity or closure of Unit III by GPCB, we may not be able to fully operate Unit- III and utilise its production capacity which may lead to loss of production which may affect our business, financial condition and results of operations.

3. Product concentration risk: Our top 20 products contributed 60.49%, 70.58%, 68.62%, 69.85% and 70.04% of our revenue for the nine months period ended December 31, 2023, December 31, 2022 and the Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively. The concentration of our product sales being dominated by our top 20 products makes us vulnerable to demand risks for these products. In the event of any fall in demand for our top 20 products may affect our business, results of operations, financial condition and cash flows.

4. Customer concentration risk: We have historically derived, and may continue to derive, a significant portion of our income from our top 10 customers. Our top 10 customers contributed Rs.306.08 million, Rs.397.06 million, Rs.484.43 million, Rs.462.03 million and Rs.351.80 million towards our revenue representing 45.22%, 53.58%, 50.68%, 56.18% and 56.32% of our revenue for the nine months periods ended December 31,2023, December 31,2022 and the Fiscals 2023, 2022 and 2021, respectively. Further, our Company has not entered into any long-term agreements with our customers for purchasing our products. Loss of one or more of these customers or uncertainties in demand or a reduction in the amount of business we obtain from them for any reason could have an adverse effect on our business, results of operations, financial condition and cash flows.

5. Industry concentration risk: The majority of sale of our products is concentrated in industries viz. Pharmaceuticals and Scientific Research and Laboratory Testing. Revenue contribution from Pharmaceuticals and Scientific Research and Laboratory Testing industries during the nine months periods ended December 31,2023, December 31,2022 and for Fiscals 2023, 2022 and 2021 aggregate to 71.67%, 69.95%, 69.99%, 73.54% and 77.81% respectively. Any decrease in the demand for our products from our customers in Pharmaceuticals and Scientific Research and Laboratory Testing, may adversely impact our results of operations, financial condition and cash flows.

6. Manufacturing operations concentration risk: Our business is dependent on our three Manufacturing Facilities which are strategically concentrated and located at Vadodara, Gujarat. Any shutdown of operations of our Manufacturing Facilities may have an adverse effect on our business and results of operations.

7. Supplier concentration risk: We are dependent upon few suppliers for supply of primary raw materials essential to the manufacturing of our products. Our top 10 suppliers contributed Rs.147.59 million, Rs.197.34 million, Rs.238.20 million, ^211.94 million and ^162.48 million representing 44.22%, 45.54%, 42.13%, 42.89% and 46.61% of our total purchase for the nine months periods ended December 31, 2023, December 31, 2022 and the Fiscals 2023, 2022 and 2021, respectively. In case of shortage of raw materials or if we are unable to procure the raw materials from other sources or in timely manner, we may be unable to meet our production schedules for our products and deliver such products to our customers in timely manner, which may adversely affect our customer relations and reputation.

8. We had a high current ratio of 6.05,3.82,3.85,3.21 and 3.30 for nine months period ended on December 31,2023, December 31,2022 and Fiscals 2023,2022 and 2021 respectively and we cannot assure you that we will be able to prudently manage our short term fund requirements and efficiently utilize our high cash reserves in business operations. Consequently, we may not be able to maintain an optimum level of current ratio in the future.

9. The size of our Company is relatively small in terms of revenue from operations when compared with other industry players and listed peers. Further, we have a negligible market share in the chemical industry. Our inability to successfully implement our growth strategies would result in our Company remaining small compared to other industry players.

10. We are not fully utilizing our installed capacity at any of our manufacturing units. The average utilised capacity of our Manufacturing Units is 50.47%, 67.23%, 70.98% and 78.36% for the nine months period ended December 31, 2023 and Fiscals 2023, 2022 and 2021 and may reduce in future due to various factors including raw material availability, product requirements of our customers, product mix, product cycle, availability of man power, industry and market conditions may adversely affect the operations.

11. Our Company will not receive any proceeds from the Offer for Sale portion of the Offer and the same will be received by the Promoter Selling Shareholders.

12. The development and commercialisation of new products are complex, time-consuming, costly and involves business risk. As on December 31, 2023, we have 122 products under various phases of research and development. We may be unable to successfully create the required product. In the event we accept a particular order but are unable to meet the levels of purity as required by the customer and are unable to supply the desired product, we may lose our customers to competitors who may be able to manufacture and supply such products and lead to a loss of customer which may adversely affect our revenues and profitability.

18. The average P/E ratio of our listed industry peers is 67.50 while P/E ratio of our Company is at premium of 31.63 times at the higher price band and 30.00 times at the lower price band.

19. Average Cost of Acquisition: The average cost of acquisition of Equity Shares by the Selling Shareholders is less than the Offer Price. The average cost of acquisition of Shares for the Promoter Selling Shareholder is as follows:

Ms certified by M/s. Mahesh Udhwani & Associates, Chartered Accountants pursuant to their certificate dated May 28,2024.

20. Weighted average cost of acquisition of all Equity Shares transacted by the shareholders in the three years, eighteen months and one year preceding the date of the Prospectus these new products or encounter unexpected delays in the launch of these products and even if launched as planned, such products may not perform as we expect. Any failure in developing new High Purity Speciality Fine Chemicals may affect our future growth and business.

13. Majority of our exports is to the USA out of our total exports. We sold our products to 15 countries outside India including the United States. United States remains the largest market for our products. Our exports to United States as a % of our revenues from operations during the nine months periods ended December 31, 2023, December 31, 2022 and Fiscals 2023, 2022 and 2021 represents 20.81%, 24.82%, 22.93%, 20.76%, 17.58% respectively. Any significant social, political or economic disruptions in the USA or adverse changes in the trade and tariff policies could disrupt our exports to the USA and may adversely affect our business, operations and financial condition.

14. Our products are supplied in limited quantities for specific use by application industries. Any reduction in the requirement of our products may result in loss of business and may affect ourfinancial performance and condition.

15. We are dependent on third party transportation and logistics service providers for delivery of our products to our customers as well as raw materials to our Manufacturing Facilities. Any delay in delivery of our products or raw materials or increase in the charges of these entities could adversely affect our business, results of operations and financial condition. We also may be exposed to the risk of theft, accidents and/or loss of our products in transit.

16. Our Promoters and Promoter Group will continue to retain significant control in our Company after the Offer, which will allow them to influence the outcome of matters submitted to shareholders for approval. Such a concentration of ownership may also have the effect of delaying, preventing or deterring a change in control.

17. We may not be able to achieve the level of purity required by our customer and fail to supply the required product. In the event we accept a particular order but are unable to meet the levels of purity as required by the customer and are unable to supply the desired product, we may lose our customers to competitors who may be able to manufacture and supply such products and lead to a loss of customer which may adversely affect our revenues and profitability.

18. The average P/E ratio of our listed industry peers is 67.50 while P/E ratio of our Company is at premium of 31.63 times at the higher price band and 30.00 times at the lower price band.

19. Average Cost of Acquisition: The average cost of acquisition of Equity Shares by the Selling Shareholders is less than the Offer Price. The average cost of acquisition of Shares for the Promoter Selling Shareholder is as follows:

Ms certified by M/s. Mahesh Udhwani & Associates, Chartered Accountants pursuant to their certificate dated May 28,2024.

20. Weighted average cost of acquisition of all Equity Shares transacted by the shareholders in the three years, eighteen months and one year preceding the date of the Prospectus

As certified by M/s. Mahesh Udhwani & Associates, Chartered Accountants pursuant to their certificate dated May 28,2024.

21. Weighted average cost of acquisition, Floor Price and Cap Price

22. The BRLM associated with the Offer has handled 7 public issues (Main Board-4, SME Issue-3 during current financial year and two financial years preceding the current financial year, none of issues were closed below the Offer price on the listing date.

23. The Offer Price, price to earnings ratio market capitalization to total income ratio and Weighted Average return on net worth, may not be indicative of the market price of the Equity Shares on listing, for the years indicated:

Price to Earnings (P/E) ratio on Based on basic and diluted EPS for fiscal 2023 for our company at upperend of the price band is 31.63 times.

Weighted Average return on net worth for fiscals 2023,2022 and 2021 is 35.90%.

The Offer was made through the Book Building process in terms of Rule 19(2)(b) of the Securities Contracts (Regulation) Rules, 1957, as amended, read with Regulation 31 of the SEBI ICDR Regulations. The Offer was made through the Book Building Process, in compliance with Regulation 6(1) of the SEBI ICDR Regulations, wherein not more than 50% of the Offer was available for allocation on a proportionate basis to Qualified Institutional Buyers (the 'QIBs' and such portion, ‘QIB Portion ), provided that our Company, in consultation with the BRLM. allocated up to 60% of the QIB Category to Anchor Investors, on a discretionary basis (the Anchor Investor Portion*). One-third of the Anchor Investor Portion was reserved for domestic Mutual Funds, subject to valid Bids being received from domestic Mutual Funds at or above the pnce at which allocation is made to Anchor Investors. Further. 5% of the Net QIB Portion was available for allocation on a proportionate basis to Mutual Funds only, and the remainder of the Net QIB Portion was made available for allocation on a proportionate basis to all Ql Bs (other than Anchor Investors), including Mutual Funds, subject to valid Bids having been received at or above the Offer Price. Further, (a) not less than 15% of the Offer was made available for allocation to Non-lnstitutional Bidders (out of which one third was reserved for Bidders with Bids exceeding Rs. 2,00,000 and up to 710,00,000 and two-thirds was reserved for Bidders with Bids exceeding 7 10,00,000) and (b) not less than 35% of the Offer was available for allocation to Retail Individual Bidders (RIBs') in accordance with the SEBI ICDR Regulations, subject to valid Bids having been received from them at or above the Offer Price. All potential Bidders, other than Anchor Investors, were mandatorily required to participate in the Offer through the Application Supported by Blocked Amount {"ASBA") process by providing details of their respective ASBA Account (as defined hereinafter) and UPI ID in case of UPI Bidders (defined hereinafter), which were blocked by the Self Certified Syndicate Banks ('SCSBs') or the Sponsor Bank(s), as the case may be. to the extent of their respective Bid Amounts. Anchor Investors were not permitted to partiopate in the Offer through the ASBA process. For further details, please see 'Offer Procedure" on page 333 of the Prospectus.

The Bidding for Anchor Investors opened and closed on Friday, May 31,2024 The Company received 6 applications from 6 Anchor Investors for4,412.320 Equity Shares. The Anchor Investor Offer Price was finalized at 7136 per Equity Share. Atotal of2,871,000 Equity Shares were allocated under the Anchor Investor Portion aggregating to 7 390,456.000.

The Offer received 1,424,354 applications for 800,778,660 Equity Shares resulting in 83.68 times subscription as disclosed in the Prospectus. The details of the applications received in the Offer from Retail Individual Bidders. Non-lnstitutional Bidders and QIBs are as under(before technical rejections):

Please Note : ‘This excludes 9.754 applications for 1.537.580 Equity Shares from Retail Indrvidual which were not in bid book but which were banked.

Final Demand

Asummary of the final demand as per NSE and BSE as on the Bid/Offer Closing Date at different Bid prices is as under:

The Basis of Allotment was finalized in consultation with the Designated Stock Exchange, being NSE on Thursday. June 06.2024.

A. Allotment to Retail Individual Bidders (After Technical Rejections) (including ASBA Applications)

The Basis of Allotment to the Retail Individual Bidders, who have bid at cut-off or at the Offer Price of Rs.136 per Equity Share, was finalized in consultation with NSE. Thts category has been subscnbed to the extent of 54.89 bmes. The total number of Equity Shares Allotted tn Retail Individual Bidders category is 3.349.500 Equity Shares to 30.450 successful applicants. The category-wise details of the Basis of Allotment are as under

B. Allotment to Non-lnstHutional Bidders (more than Rs.2,00,000 and upto Rs.10,00,000) (After Technical Rejections) (including ASBA Applications)

The Basis of Allotment to the Non-lnstitutional Bidders (more than <2,00,000 and upto Rs.10.00.000), who have txd at the Offer Price ofRs. 136 per Equity Share or above, was finalized in consultation with NSE. This category has been subscribed to the extent of 265.86 times. The total number of Equrty Shares allotted in this category is 478.500 Equity Shares to 310 successful applicants. The category-wise details of the Basis of Allotment are as under (Sample)

Please Note: 64 additional Shares have been allocated to 17 Successful Allottees from Slno 2 to 52 in the ratio of 1:1

1 additional Share allotted to 12 Allottees amongst 17 Successful Allottees from Slno 2 to 52 in the ratio of 12:17

C. Allotment to Non-lnstitutional Bidders (more than Rs.10,00,000) (After Technical Rejections) (including ASBA Applications)

The Basis of Allotment to the Non-lnstitutional Bidders (more than Rs.10.00,000). who have bid at the Offer Pnce of Rs.136 per Equity Share or above, was finalised in consultation with NSE. This category has been subscnbed to the extent of 323.45 times. The total number of Equity Shares allotted in this category is 957.000 Equity Shares to 621 successful applicants. The category-wise details of the Basis of Allotment are as under: (Sample)

Please Note: 1 additional Shares have been allocated to all Successful Allottees in the ratio of 1:1

1 additional Share allotted to 39 Allottees amongst all Successful Allottees in the ratio of 39:621

D. Allotment to QIBs (After Technical Rejections)

Allotment to QIBs. who have bid at the Offer Price of Rs.136 per Equity Share or above, has been done on a proportionate basis in consultation with NSE. This category has been subscribed to the extent of 86.52920 times of Net QIB portion. As per the SEBIICDR Regulations, the allocation to Mutual Funds is 5% of the Equity Shares of the available Net QIB portion. However, due to 'Nil" Subscription by the Mutual funds the unsubscnbed portion of Mutual Funds were added back to remaining QIB portion available for allotment i.e. 1,914.000 Equity Shares (including unsubscribed portion of 95,700 equity shares from QIB Mutual Fund on a proportionate basis The total number of Equity Shares allotted m the QIB category is 1,914,000 Equity Shares, which were allotted to 57 successful Applicants.

E. Allotment to Anchor Investors (After Technical Rejections)

Our Company, in consultation with the BRLM. have allocated 2,871,000 Equity Shares to 6 Anchor Investors (applied through 6 Anchor Investor Application Forms) (including Nil domesticMutua Funds through Nil schemes: at an Anchor Offer Price at 1136 per Equ tySha^re n accordance with SE8IICDR Regulations. This represents 60% of the QIB portion

The Board of Directors of our Company at its meeting held on June 06.2024 has taken on record the basis of allotment of Equity Shares approved by the Designated Stock Exchange, being NSE and has allotted the Equity Shares to various successful applicants. The Allotment Advice Cum Refund Intimation and/or notices have been dispatched to the address of the investors as registered with the depositories Further, instructions to the SCSBs have been issued for unblocking of funds and transfer to the Public Offer Account on June 06.2024 and the payments to non-syndicate brokers have been issued on June 07,2024. In case the same is not received within ten days, investors may contact the Registrar to the Offer at the address given below. The Equity Shares allotted to the successful allottees have been uploaded on June 07.2024 for credit into the respective beneficiary accounts subject to validation of the account details with the depositories concerned. Our Company has filed the Listing application with BSE and NSE on June 07.2024. Our Company has received the lisbng and trading approval from BSE and NSE, and trading will commence on June 10.2024.

Note: All capitalized terms used and not specifically defined herein shall have the respective meanings assigned to them in the Prospectus.

INVESTORS PLEASE NOTE

The details of the Allotment made was hosted on the website of Registrar to the Offer, KFin Technologies Limited at www.kfintech.com.

All future correspondence in this regard may kindly be addressed to the Registrar to the Offer quoting full name of the First/ Sole applicant, Bid cum Application form number. Bidders DP ID. Client ID. PAN. date of submission of Bid cum Application Form, address of the Bidder, number of Equity Shares applied for. name and address of the Designated Intermediary where the Bid cum Application Form was submitted by the Bidder and a copy of the Acknowledgement Slip received from the Designated Intermediary at the address given below:

THE LEVEL OF SUBSCRIPTION SHOULD NOT BE TAKEN TO BE INDICATIVE OF EITHER THE MARKET PRICE OF THE EQUITY SHARES ON LISTING OR THE BUSINESS PROSPECTS OF KRONOX LAB SCIENCES LIMITED.

KRONOX LAB SCIENCES LIMITED has filed a Prospectus dated June 06.2024 with the RoC. The Prospectus is made available on the website of the SEBI at www.sebi.gov.in as well as on the website of the BRLM i.e., Pantomath Capital Advisors Private Limited at www.pantomathgroup.com, the website of the NSE at www.nseincha.com and the website of the BSE at www.bseindia.com and the website of the Company at www.kronoxiabsciences.com. Any potential investor should note that investment in equity shares involves a high degree of risk and for details relating to such risks, please see the section titled 'Risk Factors' beginning on page 31 of the Prospectus. The Equity Shares have not been and will not be registered under the U .S. Securities Act or any state securities laws in the United States, and unless so registered, may not be offered or sold within the United States, except pursuant to an exemption from, or m a transaction not subject to. the registration requirements of the U S Securities Act and in accordance with any applicable U.S. state securities laws. Accordingly, the Equity Shares are being offered and sold outside the United States in offshore transactions' in reliance on Regulation S under the U.S. Securities Act and the applicable laws of the jurisdictions where such offers and sales are made. There will be no public offering of Equity Shares in the United States.